Financial freedom can mean something different to you versus your neighbor. However, regardless of your interpretation of it, knowing how to manage your money benefits everyone. It makes achieving financial goals much easier. Below are a few ways to realize your vision.
Importance of Having Good Credit
Most people who live paycheck to paycheck or don’t use a budget, tend to pay bills late. In some cases, they may even miss a bill. Being disorganized with your money can cause your credit score to spiral downward rapidly. Unfortunately, today your credit score is more important than ever. You need it to get a home, a rental property, turn on utilities, get home and auto insurance, and a personal loan. Luckily, there are some lenders that still provide starter loans to those with less than perfect credit. With each monthly payment you can begin to raise your credit score.
Honest Assessment
Everyone’s financial situation is unique. Make an honest assessment of where you stand and go from there. Figure out the amount of debt you owe out. Make sure to include all loans and credit cards. For some people, seeing the amount they owe in real, undisputed terms, can be quite an eye opener. Once you identify the amount you owe and to whom, you can work a strategy to pay it down.
Eliminating Bad Habits
You may have a compulsive nature and can’t walk into a store without buying something. Or, you are foolish with your money and waste large amounts on items not necessary. The wants and the needs fall into two totally different categories. The needs are things you can’t live without such as shelter, food and clothing. The wants are the things you desire. You can live without a large 4k television, a mink coat, or a high-end SUV. The latter should always come after you meet the needs. Additionally, buying lunch at the office is convenient, but it also saps several hundred from your budget each month.
Dividing Your Money
You know people who have everything they need and make less money than you. The reason for their success is a household budget. They don’t squander money simply because they have it in the bank. Instead they manage their money wisely. They pay their bills first, have a savings account, and a retirement fund. Adopting a household budget will let you monitor your purchases and identify exactly where your money goes. As a direct result, you’ll think about everything you want and whether it’s worth the expense.
The Weight of Debt
Large amounts of debt can cause stress. It can also consume your income making it difficult to live comfortably. Thankfully, there are ways to reduce and even eliminate most of your debt. However, becoming debt-free will take time. If you own a home you have the option of a refinance to pay off the debt. If that’s not something doable, a retirement account like a 401k can work. While no one wants to borrow from their retirement money, a 401k is something you pay back to yourself with interest over time.
Money Stashed Away
Many Americans fall into living life paycheck to paycheck because they lack savings. With no cash in reserves, any unexpected event becomes urgent. A home or auto repair or a sudden illness can put you behind on your monthly obligations. Start with a small amount dedicated to a savings account each pay period. Once you pay down a few credit cards, take a portion of that money and increase your deposits.
Becoming debt-free, establishing savings and controlling impulse purchases, are all ways to reduce the amount of money you owe to others and achieve financial freedom.